Medicaid Planning Strategy: How a Self-Settled Trust Can Help Protect Assets
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When planning for long-term care, many families worry about how to preserve what little is left of a loved one’s savings—especially when Medicaid’s strict income and asset rules come into play.
Fortunately, there’s a lesser-known but powerful tool that may offer relief: the self-settled trust. If your parent is single and has limited resources, this strategy might be a way to protect their remaining assets while still qualifying for Medicaid.
What Is a Self-Settled Trust?
A self-settled trust, often used as a form of special needs trust, allows an individual to transfer their own assets into a trust that is not counted as a resource for Medicaid purposes—under certain conditions.
The trust must meet specific legal criteria, including:
The state (such as Texas) must be named as the beneficiary after the individual passes away.
The trust must be irrevocable (it cannot be undone).
It must be used solely for the benefit of the individual who established the trust.
There are age limits and eligibility rules, so not everyone can use this tool.
This type of trust is typically used to safeguard a small remaining nest egg while maintaining Medicaid eligibility for nursing home or long-term care services.
Real-World Example: Mom Has $20,000 Left
Let’s say your mom is elderly, single, and has $20,000 in the bank. That money puts her over the Medicaid asset limit, meaning she doesn’t qualify—even though $20,000 isn’t enough to cover long-term care for more than a few months.
A self-settled trust could be the answer.
In Texas, one option is the Arc of Texas Master Pooled Trust, a pooled special needs trust that allows individuals to deposit excess funds into an account that meets Medicaid's requirements. Once the funds are placed in the trust, they are no longer counted against Medicaid’s resource limits.
⚠️ Important: Every state has different rules. In Texas, for instance, age limits apply, and different trust structures might be more or less appropriate depending on the situation.
What Is a Pooled Trust?
A pooled trust is a type of self-settled trust managed by a non-profit organization. Multiple individuals place their assets into the trust, but each person’s account is managed separately for their personal benefit. Upon the person’s death, any remaining funds may be retained by the trust or paid to the state to reimburse Medicaid.
Benefits of a pooled trust:
Lower cost to establish than a private trust
Professionally managed by an experienced organization
Helps maintain Medicaid and other public benefit eligibility
Why Use a Self-Settled Trust?
This strategy is especially useful when:
A person is single and aging with limited assets.
The amount of money they have is too much for Medicaid, but too little to meaningfully cover care costs.
The goal is to preserve some quality of life with that money—such as using it for non-covered medical needs, personal care, travel, clothing, or hobbies.
Talk to an Elder Law Attorney First
While self-settled trusts are a great option for some, they aren’t a one-size-fits-all solution. There are:
Strict legal requirements
Age limits
State-specific variations
Potential Medicaid recovery implications
An experienced elder law attorney can walk you through whether this option fits your loved one’s situation and help set up the trust correctly.
Final Thoughts
When your parent has just a small amount of money left, every dollar counts. A self-settled trust can help you protect those funds and gain eligibility for Medicaid—without spending everything down to zero.
If you’re navigating long-term care planning and don’t know where to start, we’re here to help. Let’s explore every option to protect your family’s assets and secure the care your loved one needs.
📞 Contact WG Law to schedule a consultation and learn how a trust-based strategy might benefit your family.
